Banks of the future need to fundamentally change the size, shape and location of their property portfolios in order to adapt to the challenges of talent retention, technology, geography, cost pressures and increased regulation, according to a report published by DTZ.
The report, carried out in conjunction with consultancy Unwork, is the culmination of more than 100 interviews with senior figures in the banking, property and HR industry and makes predictions on some of the potentially seismic changes which will take place in the sector in the coming years.
The global financial crisis has been a wake-up call to the banking industry which had largely ignored workplace environments and property due to the certainty of large profits and consequent salaries and bonuses. Increased costs and regulation coupled with reduced profit margins have resulted in cut-backs as well as a new approach to property portfolios and workspace.
Talent and technology are two of the major driving forces behind predicted changes made within the report. More than 50% of employees are now engaged in IT and technology-related roles. This means banks are now not only competing with other financial institutions for staff but with the likes of Google and Microsoft, companies that have spent the past decade investing heavily in creatively appealing workspaces to attract talent. With employees listing workspace followed by salary as their top priorities in any job, banks are losing their traditional place as employers of choice and will have to work harder to attract new staff.
In order to meet these challenges in an open era, banks will start to invest significantly in their workplaces and work technology, offering better environments and more flexibility in the same way the other industries have done in the past 10 years. There will be widespread introduction of agile working, and an increase in the ability to operate away from the office for most functions.
Footfall in retail branches will continue to fall at dramatic rates, forcing banks to respond with a whole new model of retail banking. Retail banking’s saviour will be customer interaction, and as banking goes digital the physical space will need a new raison d’être. This will lead to more consumer-focused branch designs, where customers can socialise, drink coffee and work as well as bank. The report also predicts the rise of a hub and spoke location model, in which only city-centre branches will offer full services with a network of kiosks and pop-ups to replace the suburban branches.
From a head office perspective, banks will consider moving out of traditional Central Business Districts (CBDs) and locating core functions in mixed used, vibrant, connected urban environments (CUEs). They will consider moving towards the ‘horizontal high-rise’, out of their traditional CBD environments, into places offering convenient access to retail and high quality restaurant offerings. In these locations, the Banks and similar financial institutions will be able to attract the best talent in the future. Simultaneously, they can continue to occupy statement buildings, maintaining the ‘building as the brand’ tradition.
James Thomson, Senior Director in DTZ’s Edinburgh office agency team, said: “The fundamental changes caused by the impact of the global economic crisis have had far-reaching effects on the banking sector. This coupled with changes in consumer demand and the rapid and continuing evolution of technology, mean that property portfolios and workspaces need to adapt accordingly.
“One challenge for banks is the vast increase in regulation, which is having a major impact on their real estate. Segregation of space and function has become the norm to show compliance, however this goes against the drive towards flexible, innovative and collaborative work environments. The institutions which best manage this dichotomy will be best equipped for future success.
“It is therefore likely that workplace environment will play an increasingly important role in relocation decisions, and a shift away from the sterile anodyne buildings of the past looks inevitable.
But do the report’s findings resonate with the Edinburgh office market?
James continued: “Whilst the DTZ and Unwork report predominantly focuses on the central London market, in Edinburgh we are seeing similar trends but going one step further. It is not just banks and financial institutions which are undergoing a shake-up, it extends to law firms, accountancy practices and other professional services firms which have a large presence in the city.
“This trend is set to continue, as expanding technology companies such as Skyscanner, CodeBase and Zonal Retail focus on Edinburgh as a City with world class universities producing a stream of high quality staff, and with a very high quality of life which continues to attract the right kind of talent. These companies are conscious of the need to provide a work environment which appeals to staff in the widest sense, not simply focused on traditional office space. This means not only good public transport and retail / leisure facilities on the doorstep, but on site catering, flexible services, concierge services, and a dynamic and vibrant environment.
“The challenge for Edinburgh is that the availability of city centre sites is limited, and the flow of new Grade A office space is not consistent. This places a high premium on “re-imagining” existing city centre buildings, and in generating high quality and well serviced office environments in key out of town locations such as Edinburgh Park.
“Edinburgh has a tremendous future in providing the ideal environment for technology orientated companies, and must meet the challenge of creating buildings and environments to meet the opportunity.”